The US Treasury sold $25 billion of 30-year bonds at a 5.216% yield, the highest since 2001, as investors demanded a bigger premium for long-duration debt. The auction signals concern that inflation will stay elevated and rates high for longer, while the Bank of Japan is reportedly weighing a September rate rise. European shares, meanwhile, stayed muted even as a Workday takeover report lifted software-linked stocks on the FTSE 100.
The US Treasury paid its highest long-term borrowing costs in a quarter of a century on Thursday, selling $25 billion of 30-year bonds at a yield of 5.216%, the most since 2001. Bond yields rise when prices fall, so the auction suggests investors expect inflation to remain high for some time, which would keep policymakers holding rates higher for longer.
Deficit pressure builds on the Treasury
The Treasury must fund a growing deficit tied to Donald Trump's spending plans and tax cuts, plus refunds on the president's tariffs. Gennadiy Goldberg, head of US rates strategy at TD Securities, called the rise in borrowing costs "problematic" for the administration. According to the Financial Times: "They have to fund the government at more expensive levels."
Bank of Japan eyes a September hike
Reuters reported that the Bank of Japan is set to raise interest rates as soon as September, citing three sources, because of persistent inflation worries and a weak yen. Concern over rising US borrowing costs was one reason Washington worked with Tokyo earlier this month to prop up the yen, though the intervention's effect proved temporary as the currency later resumed weakening.
European shares stay muted, FTSE 100 rallies on deal talk
The pan-European STOXX 600 closed little changed at 659.24 points on Thursday, retreating from record highs in the previous session. Basic resources shares led sectoral losses with a 3% fall as precious metal and copper prices weakened, while the energy sector declined 0.8%. Software shares rallied on the FTSE 100, however, after Reuters reported that Silver Lake had been in talks with Workday over a potential takeover, which sent Workday's own shares up 18% the previous day. Sage Group gained 4.5%, Experian rose 4.4% and Relx added 3.1% among the index's top risers.
Sources: Business | The Guardian, Economy News
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